Jerome H Powell: The Federal Reserve's response to the coronavirus pandemic

Testimony by Mr Jerome H Powell, Chair of the Board of Governors of the Federal Reserve System, before the Select Subcommittee on the Coronavirus Crisis, U.S. House of Representatives, Washington, DC, 22 June 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Chairman Clyburn, Ranking Member Scalise, and other members of the Select Subcommittee, thank you for the opportunity to update you on our ongoing measures to address the hardship wrought by the pandemic.

Since we last met, the economy has shown sustained improvement. Widespread vaccinations have joined unprecedented monetary and fiscal policy actions in providing strong support to the recovery. Indicators of economic activity and employment have continued to strengthen, and real GDP this year appears to be on track to post its fastest rate of increase in decades. Much of this rapid growth reflects the continued bounce back in activity from depressed levels. The sectors most adversely affected by the pandemic remain weak, but have shown improvement. Household spending is rising at a rapid pace, boosted by the ongoing reopening of the economy, fiscal support, and accommodative financial conditions. The housing sector is strong, and business investment is increasing at a solid pace. In some industries, near-term supply constraints are restraining activity.

As with overall economic activity, conditions in the labor market have continued to improve, although the pace has been uneven. The unemployment rate remained elevated in May at 5.8 percent, and this figure understates the shortfall in employment, particularly as participation in the labor market has not moved up from the low rates that have prevailed for most of the past year. Job gains should pick up in coming months as vaccinations rise, easing some of the pandemic-related factors currently weighing them down.